Why is Power of Audit only vested in Chartered Accountants?
As per Section 383A (1) of the Companies Act, 1956 every company having a paid up capital of Rs. 2 Crores or above shall employ a whole time company secretary. But by virtue of the Companies Law (Amendment) Bill, 2008 this limit was enhanced from Rs. 2 Crores to Rs. 5 Crores leaving the Company Secretary fraternity fuming.
TIOL received mails from the Company Secretary fraternity wherein they drew analogies with Section 44AB of the Income Tax Act, 1961 to highlight the step-motherly treatment meted out to Company Secretaries. As per this IT provision, a person carrying on any business and having a turnover of Rs. 40 lakhs or above is required to be audited by a Chartered Accountant and an audit report has to be submitted in the prescribed format as the case may be (Form 3CA or 3CB or 3CD) to the Assessing Officer. This was introduced in the year 1984 and the monetary limit has not changed since then.
Whereas the new Companies Law (Amendment) Bill 2008 enhanced the monetary limit from Rs. 2 Crores to Rs. 5 Crores. It appears that this enhancement has not gone down well with the Company Secretary fraternity. It is common knowledge that Company Secretaries are well versed with corporate laws and tax legislations and are competent to engage in all financial and legal aspects of the businesses. With such vast knowledge of corporate laws and tax legislations, there is a strong view emerging from this fraternity that even they should be allowed to audit the books of accounts and certify audit reports.